Welcome to Iowa Public Television! If you are seeing this message, you are using a browser that does not support web standards. This site will look much better in a browser that supports web standards, but it is accessible to any browser or Internet device. Read more on our technical tips page.

Iowa News Analysis: January 29, 2009

posted on January 30, 2009 at 3:51 PM

Paul Yeager shows a video of Governor Culver's statements on the 2010 budget, and discusses the state budget and the 700 million dollar bonding proposal and bright sectors of the economy with Associated Press reporter David Pitt.

Paul Yeager: Hello and welcome to The Iowa Journal. Education has been a long held value in Iowa. But an era of "all of our children are
above average" may be closing. It
seems the rest of the world has pulled ahead of the U.S.
and Iowa. We'll examine why that is and what can be
done about it in a bit. Certainly
education remains a priority, even at a time when state government is bracing
for significant cuts to its budget. In
total the cuts proposed by the Governor for next fiscal year amount to a
reduction of about 1.4% from the current year's budget. But the fiscal diet means most state budgets
will need to reduce anticipated expenditures next year by 6.5%. Also contained in the budget is a bonding
proposal that would finance an ambitious building program.

Governor Chet Culver: So I believe we need to take bold
action now to do something about this recession. Towards that end I have proposed the creation
of the Rebuild Iowa Infrastructure Authority.
The Rebuild Iowa Authority would issue $700 million in bonds, paid with
existing gaming revenue. We've earned a
AAA bond rating, interest rates are at near record low and our state has one of
the lowest debt levels of any state in the nation. In fact, we're ranked 48th in the nation when
it comes to our public debt per capita.
If we doubled our current debt amount we would still be ranked
48th. When fully leveraged this $700
million investment will lead to billions of dollars of projects to improve our
state, to rebuild our flood-affected areas and create thousands of new
jobs. So, while we're cutting back on
the day-to-day expenditures of state government, we must be investing in bricks
and mortar to create jobs, support businesses and keep our economy going.

Paul Yeager: Those are comments made by the Governor
yesterday in Des Moines
at a press conference. David Pitt of the
Associated Press is with us to help examine these proposals as well as some
private sector trends. So, David first
let's start with this bonding proposal idea.
Do you think there will be any takers on buying the state of Iowa bonds?

David Pitt: I think so.
As the Governor said the state has a good bond rating, it means our tax
exempt bonds people are looking for safe places to put their money and these
types of bonds, revenue bonds pay typically more than U.S. Treasury bonds so
there is probably going to be a market for them.

Paul Yeager: So, there's not any question of if but it's
a matter of when and it's a matter of how quickly we need to move forward. We know that these are going to sell, we
think they're going to go quickly. That
is good news to Iowans. Will they be
bought by Iowans? Are they going to be
bought by somebody out of state, out of country?

David Pitt: Well, my guess is that they will be investors
in general who are looking for these types of investments so it could be a
combination of anybody.

Paul Yeager: Let's actually have some bright economic
news if we can. There are companies
coming to Iowa -- IBM was announced in Dubuque last week -- there
are other indicators, things are looking up in some parts, where is that?

David Pitt: Well, I think if you look in general the
state according to December figures that were released has the 6th lowest
unemployment rate in the country still under 5%, we're at 4.6% right now. There are a few states that have peaked over
10% so to give you kind of a relative idea of where we stand our unemployment rate
generally is lower than other states and we do have a couple of companies in
Iowa that seem to be doing well and seem to be weathering the recession. Wells Fargo, not based here but it has a
significant presence in Des Moines, just released its quarterly report and
although the quarterly report didn't look so great because it did have to write
off a lot of money and investments and it bought Wachovia and had to take some
losses from that but they are making loans, the bank is making loans, they are
getting new customers and they seem to be weathering the recession as large
banks go relatively well.

Paul Yeager: And you were on a conference call I think
you said earlier this week with Principal.
What did you learn from that?

David Pitt: Well, Principal is another company that has
seen some issues with investments and so they have had to take some losses in
the last several quarters but they were making a point in this conference call
with analysts and investors that they have a pretty diversified revenue
stream. They have operations in other
countries and they are growing in their international asset management part of
their business so it's a well diversified company and they were making the
point that we're here to last through this thing.

Paul Yeager: We talked about bonding but there is also an
issue that moved through the statehouse on Thursday that would provide for
local option sales tax increases specifically for flood relief. Tell me about that bill and what's been
behind that.

David Pitt: The idea I think it started in eastern Iowa,
the Cedar Rapids area, where they're looking for opportunities to raise revenue
to try to pay for some of the damage that was done by the flooding. What this bill would do, it's been sent to
the Governor now would allow specific counties that have been declared a
disaster area to vote on whether or not they want to raise their local taxes by
one penny. Those counties and
municipalities do not have 7%, which is the state limit now, they could raise
their taxes from 6% to 7% if they are at 6% now. There are a few counties that have maxed out already
and they wouldn't be able to do it but for a lot of those that have been
declared disaster areas they would have that option.

Paul Yeager: That will now go to the Governor and we'll
find out when that gets signed in a little bit.
Also want to talk about what Iowa
might see, some of that economic impact of investment. The Governor talked about that a little
bit. There are industries, we talked
about Principal Financial and Wells Fargo, there's other industries that are
looking up in Iowa. What are those?

David Pitt: Well, if the Governor's plan goes through
obviously it's going to boost construction.
I think that is his major proposal is that construction projects could
create a number of jobs and he's talking about projects that are really ready
to go, they are projects that really just need the money, need the funding and
they're ready to hit the road, so to speak, to get the projects underway
whether it's bridges, whether it's fixing some damage from flooding. So, that aspect of the economy could I think
get rolling relatively quickly and that is the whole idea behind doing it that
way.

Paul Yeager: There's a company, Terra Industries in Sioux City is doing well,
a farm company.

David Pitt: Terra Industries is a company that produces
fertilizer, it has benefited from the fact that its major input cost, natural
gas, has gone down so it's not paying as much for its raw materials. But fertilizer, as any farmer could tell you,
costs a lot these days so their profit level has really increased.

Paul Yeager: Might see help in the farm economy. David Pitt of the Associated Press, thank you
for stopping by The Iowa Journal tonight.